'Poppy Quarter' Behind Spy Coin Alert

WASHINGTON -- An odd-looking Canadian quarter with a bright red flower was the culprit behind a false espionage warning from the Defense Department about mysterious coins with radio frequency transmitters, The Associated Press has learned.

The harmless "poppy quarter" was so unfamiliar to suspicious U.S. Army contractors traveling in Canada that they filed confidential espionage accounts about them. The worried contractors described the coins as "filled with something man-made that looked like nano-technology," according to once-classified U.S. government reports and e-mails obtained by the AP.

The silver-colored 25-cent piece features the red image of a poppy _ Canada's flower of remembrance _ inlaid over a maple leaf. The unorthodox quarter is identical to the coins pictured and described as suspicious in the contractors' accounts.

The supposed nano-technology on the coin actually was a protective coating the Royal Canadian Mint applied to prevent the poppy's red color from rubbing off. The mint produced nearly 30 million such quarters in 2004 commemorating Canada's 117,000 war dead.

"It did not appear to be electronic (analog) in nature or have a power source," wrote one U.S. contractor, who discovered the coin in the cup holder of a rental car. "Under high power microscope, it appeared to be complex consisting of several layers of clear, but different material, with a wire-like mesh suspended on top."

The confidential accounts led to a sensational warning from the Defense Security Service, an agency of the Defense Department, that mysterious coins with radio frequency transmitters were found planted on U.S. contractors with classified security clearances on at least three separate occasions between October 2005 and January 2006 as the contractors traveled through Canada.

"We'll have a good laugh over it," said John Regitko, who writes a newsletter for a leading coin-collecting organization, the Canadian Numismatic Association. "We never suspected there was such a thing (as spy coins) anyway."

Regitko predicted the quarter will become especially popular among collectors because of its infamy as the culprit behind the spy warning, despite the quarter's wide availability. "Everybody has some in their drawer at home," he said.

One contractor believed someone had placed two of the quarters in an outer coat pocket after the contractor had emptied the pocket hours earlier. "Coat pockets were empty that morning and I was keeping all of my coins in a plastic bag in my inner coat pocket," the contractor wrote.

The Defense Department subsequently acknowledged it could never substantiate the espionage warning, but until now it has never disclosed the details behind the embarrassing episode.

In Canada, senior intelligence officials had expressed annoyance with the American spy-coin warnings as they tried to learn more about the oddball claims.

"That story about Canadians planting coins in the pockets of defense contractors will not go away," Luc Portelance, now deputy director for the Canadian Security Intelligence Service, wrote in a January e-mail to a subordinate. "Could someone tell me more? Where do we stand and what's the story on this?"